Gordon Brown is facing another round of tough questions from journalists in his last monthly press conference of 2007. After a torrid few months since his last-minute decision against calling an autumn general election, the prime minister was still facing difficulties this week over lost computer discs containing millions of people's personal identity, the unresolved Northern Rock crisis and party funding. The British presence in Iraq and Afghanistan are also likely to be discussed.

11am

Brown raises the issue of global financial turbulence, which he has been discussing with several world leaders. Flanked by the chancellor, Alistair Darling, he says he wants to know first hand the measures being put in place to stabilise the economy.

Figures published this week show UK inflation to be at 2.1%, which suggests Brown's prudent approach to public sector pay (restraint) has paid off.

The PM has invited the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, to discuss further the long term challenges of stabilising the global financial system.

11.10am

Darling takes over. He has met the governor of the Bank of England, Mervyn King, among others, to discuss the current financial situation. Darling says he welcomes the measures taken by banks globally to address current turbulence. Cooperation is demanded of us all, he says.

The chancellor rolls off a list of figures to show that stabilising inflation gives the UK the flexibility to deal with global difficulties. Low pay settlements, the lowest in 10 years, were necessary, he says.

Darling cites the controversy over police pay, as police still murmur about taking industrial action over the staged pay award, worth in effect just 1.9%. He cites high employment figures as proof that the figure was about sharing the pain in the interest of the wider picture.

Darling says the government's priority over the next few weeks is to "bear down" on inflation and maintain financial stability. Darling turns to the subject of Northern Rock. He will consider all options, he says - as speculation continues that the government will temporary nationalise the bank.

Britain's strong financial performance puts it in a good position to address more possible financial turbulence, the chancellor says.

Back to Brown. Asked about the credit crunch, he says it is not just between Britain and the US. Banks all over the world are reporting concerns.

Regarding Britain and Northern Rock, the latter had an "unsound" business plan. However, by addressing the problems in the summer, the worst has been headed off. Since 1997, what is remarkable about the British economy is that it has been tested by problems in Asia, Russia and elsewhere. The test, which we have passed, was keeping inflation down - despite protests from public sector workers over pay awards.

Over to Darling again, and Northern Rock. The problem was that the institution had "no plan B". Somebody should have asked earlier what its fallback position was. It got into difficulties and we were absolutely right to be lender of last resort to stop the banking system collapsing. If we hadn't done that, we would have been criticised for failing.

11.20am

Speaking at breakneck speed, Darling signals wideranging reforms to be announced in January.

Brown is thanked by the BBC's Nick Robinson for providing mince pies at the last press conference of the year. It was a personal touch, says Brown.

Humour over. Blair and Brown worked as a partnership but Brown and Darling have failed at the first crunch test of managing the economy, haven't they, a questioner asks.

Brown just replies there will be no repeat of boom and bust cycles of the past. The measures we have taken, including the unpopular ones, ensured low inflation and a stable economy, he says. People will see we maintained growth, he says, and the British economy is growing faster than any other.

Regarding the partnership team, it is not "events, dear boy", it is how you deal with them and showing you are not diverted from the long term challenges. In short, Brown and Darling are a fine partnership, as only time will show.

Brown is asked about the Bank of England having warned that Northern Rock could run. Brown says we were dealing with a bank with an unsound business plan, whose effects we needed to stop spreading.

Mervyn King supports what we are doing, he says. The test is whether we can withstand global financial storms. Brown reckons Britain will.

Darling again, rehearsing the Northern Rock debacle and government actions to bring things back on course. We were faced with unprecedented pressures that started in the US and swept across the world, he says. We had to intervene, and we will see it through. The bank governor agrees with the decision, as does the chair of the FSA.

Brown is asked whether he can guarantee tax payers will get their money back from the bank. He says he's doing everything to ensure Northern Rock finds the right buyer. We do not rule out any options for the future, he says (into which we may read the possibility of nationalising the beleaguered bank).

Darling chips in, in what is proving to be a double act press conference. The bank had good assets, which have been secured against its lending, he says.

Brown is asked whether Mervyn King will get a second term as governor. He replies the recruitment process will be the same as usual.

The PM is also asked whether he will be able to take a holiday, given the current difficulties. Yes he will, as will the chancellor.

11.30am

Brown is asked about Charles Clarke, who tells the Guardian today the PM is not supporting his senior ministers enough and has stirred up resentment by making comments such as "British jobs for British workers."

Brown says it is right to give British workers work and he is not embarrassed about putting them back in jobs. He also feels Clarke's views were distorted and says the former minister has a lot to offer in public life.

Jon Snow, from Channel 4, asks about the "wide boys" in the hedge funds who got us into this credit crunch mess. Some say there are elements of criminality involved - is Brown looking at that?

The PM says delicately Snow is being "quite picturesque" and probably could not support such claims. (One suspects Snow will hold him to that.) The PM says the point is, can we withstand this storm?

Brown is clearly a man who believes you define yourself in a crisis and sees the current one as an opportunity to show leadership, rather than hold his head in despair over what is going on.

A Mexican reporter says she wasn't surprised about the mince pies, because he had a Celtic heart. He beams. She carries on chatting, and Brown says people will start thinking he asked her here. "You did," she says to great laughter.

Our Mexican friend is taking a long time to get to her point: what was the good news for the Queen this year? Her wedding anniversary, apparently.

James Landale, from the BBC, says when Vince Cable, of the Liberal Democrats, suggested nationalising Northern Rock, he was laughed off. Now the government is considering it. What has changed?

Brown says all options are being considered, a line echoed by Darling, chipping in again.

The next subject is David Varney's report saying corporation tax in Northern Ireland should not be reduced. Brown is asked to respond to claims that Varney is too close to the Treasury, and how is Northern Ireland expected to compete if it won't entertain reducing the tax?

Brown says there was a wideranging consultation on the reforms under consideration. He says he wants the province to enjoy all the advantages the rest of the island has. The signs are people want to invest there, he thinks. Varney can help the province with new opportunities for investment.

11.40am

On to the withdrawal of troops from Basra earlier this week. How does this sit with Brown's moral compass, in light of attrocities in the country including the beheading of women?

We still have more than 4,000 troops in Iraq, says Brown. Over the past few months we have seen a 90% fall in attacks on troops and less, not more violence.

I do not accept the picture you paint, Brown says. Nothing is perfect when you train, for the first time, people to be police as well as armed forces (who are accused of working with militias and along political lines). The decision to withdraw was to allow economic and cultural development to take place. I disagree with your picture, Brown says once more.

Back again to the economy - the credit crunch and individuals' borrowing habits. Such decisions are up to individuals, Brown says, but low inflation helps - even if public sector workers did feel some pain.

Darling says people have to be sensible and both they and the bank have to assess whether a loan can be afforded. Darling harks back to the 80s, when house repossessions were rife as people became unable to repay their loasn. The situation is different this time, because of the measures we have taken.

Brown is accused of hesitating about reappointing Mervyn King as governor of the Bank of England. There is speculation he will be bounced.

We are not hesitating, Brown counters.

11.50am

The PM is then asked about new year resolutions, both professional and personal.

Dealing with problems as and when they arise is going to be a theme for next year, he says. He once again tells us how well he handled the myriad challenges he has faced since taking office just six months ago.

Standing in a smart blue suit, white shirt and light blue tie, the well groomed Brown is clearly trying to present an image of a man in charge, in control. He is gesticulating a lot, however.

Next year, he will be focusing on what matters to the public, he says. Housing, for example. Making sure there are more affordable homes. In health, he'll be concentrateing on access to GPs, clean hospitals; in education, it will be training and apprentices.

Disappointingly he doesn't share with the press pack his personal resolutions. What could they be? Answers on a postcard, please.

Brown is lobbed a question about climate change and the Bali talks. He says he reckons that, within two years, an agreement will be on the table and supported by all big countries.

Back to Basra again, and British troops. Does the PM have a timetable for full withdrawal?

No. In spring, he will review the situation, as he has said before.The government hopes the situation will remain stable over the next few months, so they hold local elections to support local police forces.

And we are returned once more to the economy, by what sounds like an Italian journalist. The British economy has been strong because it can draw on skilled migrants, notably in the City of London. The journalist's drift is uncertain but it concerns the points system, the bar on unskilled workers and clamping down on tax exiles.

On the skills question, Brown says the country will be looking for people to match the skills it needs. Skills equal points; no skills - few points. The whole point (excuse the pun) of the Australian-style sytem is to get immigrants with the skills Britain needs.

Darling says he will clamp down on wealthy people who stay in the country for years but don't pay taxes. (Is he thinking of someone in particular?)

Brown is asked again about Iraq, and about defence. He says the defence budget has gone up and up and urgent operational requirements have been met. The equipment is a lot better than it was. We have made a commitment to increase resources - the questioner was implying he hadn't.

Brown is then questioned about the ongoing saga of the labour donor revelations, which emerged two weeks ago. He says he is trying to sort it out, which is why he regrets the fact the Tories have walked away from the issue (following the Hayden Phillips report into reforms of donations).

A question - again - about Northern Rock and ensuring tax payers don't end up subsidising the bank's blunder. Darling says the bank has a very good "mortgage book", which is reassurance we will see the money again. Darling calls it a "contingent guarantee".

Brown takes over. He wants to remind us how well his team have handled this tricky problem.

Noon

Brown about a lack of Christmas spirit as he is lobbed two questions about the money committed to Palestine as part of the peace process. What reassurances do we have this money won't be handed to the wrong people?

Regarding rocket attacks on Israel, President Abbas condemned the attacks, Brown say. Regarding the money, he senses a new will for peace. He wants to see new investment to create jobs and prosperity for the Palestineans.

The PM is asked whether he would consider altering the electoral system to make it more representative. Nodding to Nick Clegg's new role as Lib Dem leader, Brown says he'll be looking for common ground with Clegg on constitutional issues.

Brown promised £750m to Uganda when he visited the country a few weeks ago. An African journalist tells him the president just ordered himself a £50m jet for Christmas. Care to comment?

On a separate issue, what is his view of the new England coach? He will find out just how short the honeymoon will last, Brown quips.

Regarding Uganda, the prime minister says the cheque he wrote was for development and social and economic projects.

Back to Northern Rock - yet again!. Would Brown advise tax payers to save with the bank or to take out a mortage with it? Darling says that would be up to individuals, and he once more reiterates that the problem has to be seen through. You have to stick with it, he says.

Brown again. Vince Cable talked about his passion for Strictly Come Dancing yesterday and said politicians could learn lessons from programes like that about galvanising interest. Brown confesses he likes the X Factor more, but his Christmas will be spent watching sport.

Brown says the need for greater transparency on evaluating risk should sweep across the world. We need early warning systems, for example, he says. Big institutions are learning, painfully, to put better measures in place.

Will the Northern Rock rescue operation impact on government borrowing, and won't that show up next March, a journalist asks. Darling says that, at this moment, the money is coming from the Bank of England.

He says he has been speaking with his US counterpart about the need for transparency in the financial system. It has been taking longer than it should do for financial situations to become clear.

A more local issue. Liverpool is about to be European Capital of Culture and faces a £20m blackhole at the same time. It's a Lib Dem-run council. Will the PM visit, and will the government help with that blackhole?

All the best for next year, Liverpool, Brown says, and yes he will probaby be visiting.

Brown must be enjoying things because he is now almost 10 minutes over time.

A French-sounding journalist asks if there is a move among France, Germany and Britain to isolate Brussels on financial reforms.

Not at all, Brown replies. We are moving forward with reforms of financial systems. We have put forward proposals in a joint declaration. The three of us - France, Germany and Britain - will meet again. We are keeping Barroso (of Spain) informed and want to get everyone involved.

Brown is asked about the midnight mass on Christmas Eve being brought forward because of fears of late night drunkeness - a sad state of affairs. Does he care to comment?

Brown says he will put forward radical proposals on binge drinking in the new year.